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Examining the Race Gap in Homeownership

By Sulaiman Abdur-Rahman · February 23, 2022 · 5 minute read

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Examining the Race Gap in Homeownership

Despite the Fair Housing Act of 1968 and other federal laws, a large race gap in homeownership continues to exist across the United States. The Black homeownership rate in the fourth quarter of 2021 stood at 43%, compared with 74% for non-Hispanic whites, according to the U.S. Census Bureau.

A large race gap in homeownership rates has existed since at least 1900, but the disparity today appears to be among the worst in modern American history. Below we further examine the race gap in homeownership and identify possible solutions.

History of Racial Housing Disparities

The United States has a long history of racial housing disparities. The National Community Reinvestment Coalition’s 2020 Home Mortgage Report examined the disparities from 1900 to 2020 and found the gap in homeownership rates between Black and white families reached its lowest level of 23 percentage points in 1980 and its highest level of 30 percentage points in 2015.

Newer data shows that the Black-white gap in homeownership rates exceeds 31 percentage points amid the COVID-19 pandemic, according to the U.S. Census Bureau’s homeownership statistics for the fourth quarter of 2021.

The homeownership rate as of Q4 2021 stood at 74.4% for non-Hispanic white households, 61.2% for Asian, Native Hawaiian, and Pacific Islander families, 48.4% for Hispanic families of any race, and 43.1% among Black households, according to the census data.

A number of factors have contributed to the race gap in homeownership, including the legacy of race-based discrimination in the housing market.

Homeownership Race Gap 1940-2020

Lasting Effects of Redlining

Redlining, the discriminatory practice of denying home loans and other credit services to ethnically diverse neighborhoods based on the race, color, or national origin of the residents of those neighborhoods, is one of the factors explaining America’s long-standing race gap in homeownership.

The federal government institutionalized redlining in the 1930s when a now-defunct federal agency, the Home Owners’ Loan Corp., created “residential security maps” in dozens of cities across the country to systematically deny mortgages in neighborhoods of color.

HOLC ceased to exist in 1951, and Congress later outlawed redlining with the Fair Housing Act of 1968, but lending discrimination in the housing market has persisted.

An article published in the journal SSM-Population Health in June 2021 found that “redlining has continued to influence racialized perceptions of neighborhood value and practices that have perpetuated racial inequities in lending.”

“Decades of racism in the housing market,” the article adds, “have prevented people of color, particularly Black Americans, equal access to capital, low-cost loans, and homeownership.”

The Department of Justice continues to enforce the Fair Housing Act to address ongoing allegations of modern-day redlining.

Current Black Homeownership Gap

As mentioned, the current gap in homeownership rates between Black and white families is more than 31 percentage points. The vast majority of white families own residential property, while the majority of Black families do not, data shows.

Homeownership is often regarded as the American dream, but not everyone who wants to buy a house is able to get financing. The overall denial rate for home-purchase loans among all applicants in 2020 stood at 9.3%, according to the Consumer Financial Protection Bureau.

Bureau data shows that 18.1% of Black applicants had their mortgage loan requests denied in 2020, compared with 6.9% of non-Hispanic white applicants.

This first-time homebuyer guide recommends downloading your credit reports before submitting any applications for home loans. Creditworthy applicants who have home loan applications denied may be victims of discrimination. You can get free credit reports at annualcreditreport.com and can check your credit scores in several ways.

Homeownership by Race

The Census Bureau in 2022 released data highlighting homeownership by race as of Q4 2021. Here’s what the data revealed:

Race Homeownership rate
Non-Hispanic white alone 74.4%
Asian, Native Hawaiian, and Pacific Islander 61.2%
Hispanic (of any race) 48.4%
Black alone 43.1%
Other (including mixed races) 57.6%
All (nationwide population) 65.5%

Fixing the Black Homeownership Gap

The Urban Institute, a nonprofit research organization, has a five-point framework aimed at reducing the Black homeownership gap. Here are the five points:

1. Advance Local Policy Solutions

Local policy reforms, including the removal of any discriminatory terms in homeowner and condominium associations and possible property tax relief for low-income and moderate-income taxpayers, can help reduce the Black homeownership gap.

Expanding small-dollar mortgages could also make a difference.

2. Tackle Housing Supply Constraints and Affordability

Promoting affordable housing nationwide, including new investments in historically segregated and devalued neighborhoods, may help reduce the Black homeownership gap.

Public policy leaders could also review the viability of lease-to-own programs as a pathway to homeownership.

3. Promote an Equitable and Accessible Housing Finance System

Greater access to down payment assistance programs for economically disadvantaged consumers may reduce the Black homeownership gap.

This online mortgage calculator shows how home loan seekers can lower their monthly mortgage payments and total interest charges by making a larger down payment on a home.

4. Accelerate Outreach for Mortgage-Ready Millennials

Reaching out to mortgage-ready millennials and improving tax credit incentives for renters to become homeowners may help reduce the Black homeownership gap.

Public-private partnerships can scale up additional programs aimed at bolstering homeownership among low-income people.

5. Focus on Sustainable Homeownership and Preservation

Funding programs to prevent foreclosures could help the 43.1% of Black families who own residential property to maintain their wealth.

Providing homeowners of color with financial education services may also help preserve homeownership among Black families.

The Takeaway

Racial housing disparities persist, despite federal laws designed to equal the playing field. The effects of redlining echo today, when 74% of white families own residential property and just 43% of Black families do. Solving this social inequity may require significant action and reform. See how employers can help first-time homebuyers.

If you’re looking for a mortgage lender, SoFi can help you achieve the American dream. Qualified first-time homebuyers can put just 3% down.

Explore SoFi fixed-rate mortgage options and get prequalified in minutes.

Photo credit: iStock/Morsa Images
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